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| Egypt requests $4.8bn loan from visiting IMF chief | |
| (about 4 hours later) | |
| The head of the International Monetary Fund is in Egypt to discuss an urgently-needed financial aid package for the country's struggling economy. | The head of the International Monetary Fund is in Egypt to discuss an urgently-needed financial aid package for the country's struggling economy. |
| Christine Lagarde met President Mohammed Mursi and his new cabinet. | |
| Finance Minister Mumtaz al-Said said Egypt had requested a loan of $4.8bn (£3bn), up from the $3.2bn that had been mooted since last year. | |
| It is needed to cover budget deficits resulting from shrinking tourism and foreign investment revenues. | It is needed to cover budget deficits resulting from shrinking tourism and foreign investment revenues. |
| Egypt's foreign reserves have fallen to well under half the levels seen before last year's popular uprising against former President Hosni Mubarak, when the central bank started to sell dollars to prop up the Egyptian pound. | Egypt's foreign reserves have fallen to well under half the levels seen before last year's popular uprising against former President Hosni Mubarak, when the central bank started to sell dollars to prop up the Egyptian pound. |
| The government is facing a balance of payments crisis and high borrowing costs, with local banks shouldering almost all short-term lending to the state, and experts say financial aid is urgently needed to avoid currency devaluation. | The government is facing a balance of payments crisis and high borrowing costs, with local banks shouldering almost all short-term lending to the state, and experts say financial aid is urgently needed to avoid currency devaluation. |
| Egypt's budget deficit for the 2012-3 fiscal year is predicted to be 7.9% of gross domestic product (GDP), while it has internal debt of $193bn and foreign debt of $33.8bn. | Egypt's budget deficit for the 2012-3 fiscal year is predicted to be 7.9% of gross domestic product (GDP), while it has internal debt of $193bn and foreign debt of $33.8bn. |
| Months of political turmoil have taken their toll on Egypt's struggling economy. Tourism, one of the country's main industries and a major source of foreign currency, has been hit hard. The civil unrest has not only scared away tourists, it has deterred investors as well. | Months of political turmoil have taken their toll on Egypt's struggling economy. Tourism, one of the country's main industries and a major source of foreign currency, has been hit hard. The civil unrest has not only scared away tourists, it has deterred investors as well. |
| Add to that the problems of corruption and poverty. In this country of 80 million people, around 40% live below the poverty line. Last year, many young Egyptians took to the streets, hoping for a better future, but there is widespread youth unemployment. | Add to that the problems of corruption and poverty. In this country of 80 million people, around 40% live below the poverty line. Last year, many young Egyptians took to the streets, hoping for a better future, but there is widespread youth unemployment. |
| More than half of Egypt's foreign currency reserves have been eroded, in attempts to defend the Egyptian pound against devaluation. Cairo has been negotiating with the IMF for emergency funding for the last year and a half, but so far no deal has been reached. Conditions attached to any loan are likely to include unpopular austerity measures, a tough proposition for the new government. | More than half of Egypt's foreign currency reserves have been eroded, in attempts to defend the Egyptian pound against devaluation. Cairo has been negotiating with the IMF for emergency funding for the last year and a half, but so far no deal has been reached. Conditions attached to any loan are likely to include unpopular austerity measures, a tough proposition for the new government. |
| 'Continuous commitment' | 'Continuous commitment' |
| Negotiations between Egypt and the IMF have been taking place in the 18 months since the overthrow of Mubarak, but no deal has been agreed because the IMF has demanded that any loan gets broad political support. | Negotiations between Egypt and the IMF have been taking place in the 18 months since the overthrow of Mubarak, but no deal has been agreed because the IMF has demanded that any loan gets broad political support. |
| It also wants a comprehensive Egyptian recovery plan addressing economic imbalances, protecting the poor and generating foreign investor confidence, according to the Reuters news agency. | It also wants a comprehensive Egyptian recovery plan addressing economic imbalances, protecting the poor and generating foreign investor confidence, according to the Reuters news agency. |
| Now that Mr Mursi has formed a new government, and issued a decree wresting presidential powers and control of the budget from the military, correspondents say there are strong indications a deal will be done with Ms Lagarde. | Now that Mr Mursi has formed a new government, and issued a decree wresting presidential powers and control of the budget from the military, correspondents say there are strong indications a deal will be done with Ms Lagarde. |
| "Her visit is a reflection of the IMF's continuous commitment to support Egypt and its people during this historic period of transition," the IMF said in a statement last week. | "Her visit is a reflection of the IMF's continuous commitment to support Egypt and its people during this historic period of transition," the IMF said in a statement last week. |
| Mr Said has also asked the United States for a $500m grant to support the state budget. | Mr Said has also asked the United States for a $500m grant to support the state budget. |
| Earlier this month, Saudi Arabia transferred $1.5bn as direct budget support, approved $430m in project aid and said it would allow the Egyptian government to use a $750m line of credit to import oil products. | Earlier this month, Saudi Arabia transferred $1.5bn as direct budget support, approved $430m in project aid and said it would allow the Egyptian government to use a $750m line of credit to import oil products. |
| Qatar has also said it will deposit $2bn at the Egyptian Central Bank. | Qatar has also said it will deposit $2bn at the Egyptian Central Bank. |